Photo : D.R.
The economic crisis has not put a stop to mining at Yanacocha. On the contrary, while the price of metals including copper, zinc and lead has collapsed due to the global financial upheaval, the price of gold has risen sharply. In November, the price per ounce broke the 1,000 dollars threshold (670 euros), up from 871 dollars (584 euros), the average price in 2008. “It’s been a good year,” says Carlos Galvez, Financial Director of the Peruvian company, Buenaventura, which holds a 43.65% stake in Yanacocha. According to Carlos Galvez, production should reach two million ounces, up 10% on 2008’s 1.8 million. With production costs expected to remain relatively stable – they were 358 dollars (240 euros) per ounce in 2008 – profits, figures for which will be known in 2010, are expected to be substantially higher in 2009 than they were in the previous year.
According to Carlos Galvez, the mining company is in a “phase of recuperation”. 51.3% owned by the US company, Newmont Mining, Yanacocha attained a productive peak of 3.3 million onces per year in 2005, breaking all profit records before suffering a downturn. Over the last two years, business has perked up considerably. Production went up by 16% in 2008 compared to 2007, with net profits soaring by 115% to 476.5 million dollars (319.3 million euros).
Yanaconcha produces a third of the country’s gold. Indeed, Peru is the biggest gold-producing country in Latin America and the sixth biggest in the world. The company, which, directly and indirectly, employs around 100,000 people (approximately 60% of them local) is emblematic of the importance that the mining industry has assumed in the domestic economy. In 2008, the industry accounted for 59.2% of the country’s exports, with mining production accounting for 5.2% of GDP.
Peru’s natural resources make it a mining company’s dream. The country ranks thirds in the world for copper, fourth for lead, second for zinc, seventeenth for iron and third for tin. The world’s leading silver producer (18% of the world’s silver is mined there), Peru has benefited from the substantial increase in the metal’s value since the onset of the crisis. Speaking on behalf of the National Company of Mines, Oil and Energy, Mr Galvez commented, “2009 has been a good deal better than expected for the mining industry as a whole.” A number of exploration projects postponed at the start of the year have been started up again, a sure sign of an improvement in the industry’s outlook.
Corporate social responsibility
Building schools, providing villages with electricity, funding additional educational facilities. According to the company’s annual report for 2008, Yanaconcha has implemented “a programme designed to establish, by means of a number of local development projects, a new kind of relationship with people living in rural areas.” Between 2007 and 2011, Yanaconcha is set to invest 9 million dollars (€6 million euros) in the regional hospital and a series of local clinics. In effect, the company is attempting to build bridges with the villagers of Cajamarca, a region which, in spite of the success of the mining industry there, is still amongst the poorest in Peru.
However, the relationship between Yanaconcha and a considerable percentage of the local population has been fraught, to say the least, for some time now. The company is paying the price for mistakes it made when it first arrived in the region in the 1990s. A raft of incidents involving polluted water supplies have left a bitter taste in the mouths of many. Yanaconcha claims that it changed its policies in the early 2000s, but social conflict is a recurrent feature of life in Cajamarca. According to the government, Peru is currently afflicted by 132 ongoing socio-environmental conflicts, 68% of which are linked to the mining industry. In order to improve relations with local people the mining companies have developed a number of CSR projects involving direct investment in local communities. Better late than never? Perhaps. But, whatever the case, it is in their interests to diffuse the kind of popular anger that has often cost them dear in the past.
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